Union minister Nitin Gadkari on Tuesday said the government is considering a proposal to allow use of methanol as a fuel for ships, which he said would be a cheaper, cleaner and forex-saving alternative to diesel.

"We are studying deeply how to use methanol as a marine fuel and will be going before the Cabinet soon," he told reporters here.

"Eight days ago we had a meeting (with veteran scientist and Niti Aayog member V K Saraswat) where we decided that if marine engines are run on methanol, it can be import substitute, cost-effective and pollution-free," the minister said.

Saraswat examined a proposal to build 40 bunkers of liquefied natural gas along the river Ganga as part of the inland waterways project, and suggested methanol as an alternative (to LNG), Gadkari said.

Against Rs 60 for a litre of diesel, methanol would cost Rs 20-25, while its calorific value is better than that of diesel, he said, adding "the biggest priority for us is how to reduce the cost of fuel."

The minister also quipped that loss-making civic transport undertaking BEST of Mumbai can cut its losses if it starts running its buses on methanol.

Methanol is used as fuel in several countries, he said, recounting his travel on a cruise ship in Sweden which ran on 100 per cent methanol.

As the fuel is derived from coal, switch-over to methanol would benefit India, a coal surplus country, he said.

The fuel can be sourced from fertiliser companies such as RCF and Deepak Fertilisers located in or near Mumbai, one of the biggest maritime trade hubs in the country, he said.

Swedish automaker Volvo has built trucks running on methanol while Wartsila has made an engine running on 100 per cent methanol, he said.

Existing diesel engines can be converted into methanol ones by fitting a kit, similar to the one used to convert petrol or diesel engines into Compressed Natural Gas (CNG) engines, he said.